Catastrophically Successful Life Extension

Truly historic discoveries and therapies are coming online right now that will radically decrease the threat and cost of autoimmune disorders, cancers, cardiovascular disease, Alzheimer's, arthritis, obesity and diabetes, as well as dangerous influenzas, HIV and other virus-borne diseases. Regular readers know that I'm referring to companies in our portfolio.

Clearly, this is good news both for humanity in general and investors specifically. However, these changes will be, by definition, enormously disruptive. As is always the case when big changes create new winners and dethrone the old ones. How big will these changes be?

Consider the fact that already, life extension is our No. 1 public-policy challenge. It is, in fact, the root cause of our current mortgage and debt fiascos — both only symptoms of successful life-extending technologies. The technologies that have precipitated these crises, however, will soon be overshadowed by the wave of revolutionary biotech innovation.

Even those who have no personal interest in life-extension strategies, beyond those supplied by conventional medical networks, will have to deal with the social and economic problems they cause. Our lives will be profoundly affected by emerging biotechnologies that will push maximum healthy life spans up much faster and further than ever before.

Typically, when I say that life extension brings problems, the default assumption is that I'm referring to traditional fears of resource depletion and overpopulation. I'm not.

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There's not room here to deal with the Malthusian impulse. Nor, however, do I feel as if I need to. Innovation has never yet failed to find solutions to changing resource challenges, as our current situation testifies. Obesity, not starvation, is for the first time in history mankind's major challenge. Peak Oil has proven yet another overblown panic attack, as will various other resource fears — unless they are enforced via regulatory agencies. Current drug shortages, caused in large part by government price controls and regulatory morass, offer a good example.

Likewise, the fallacy of overpopulation fears was clear as far back as 1929, when demographer Warren Thompson observed that the transition from preindustrial to industrial economies was inevitably accompanied by significantly lower birth and death rates. Lower birth rates were a matter of choice, given lower infant mortality. Longer lives came from science and capitalism. The life-extension technologies they delivered included clean water, infrastructure and improved agricultural productivity. Medical and nutritional discoveries also contributed.

As was predicted by rational demographers, two direct consequences ensued from the demographic transition: shrinking younger populations and growing aged populations. Nevertheless, Warren's predictions were largely ignored until very recently. The assumption of continually growing populations persisted long after the actual trends had reversed. As a result, serious policy errors were made based on assumptions of permanently increasing demand for both housing and education. The resultant housing bubble has already collapsed. The education bubble has not yet burst, but it's quivering.

Though we've not yet seen the inevitable magazine covers trumpeting the depopulation apocalypse, there's been a sort of intellectual sea change. Decades of overpopulation horror stories are quietly being taken off the shelves, replaced by other cataclysmic boogeymen.

While Al Gore and few other stalwarts are still calling for population controls, policymakers increasingly recognize low fertility rates are the real problem facing the West. One meaningful example came in a 2000 UN report titled Replacement Migration: Is It a Solution to Declining and Aging Populations? Though the United Nations has long supported efforts to lower birth rates, the authors admitted that the demographic transition threatens the West's economic health and the ability to care for elderly populations.

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While US birth rates have dipped recently, as they usually do during periods of economic distress, there are reasons to believe that the United States may escape depopulation when the economy improves, based on recent population figures. Even so, new life-extension technologies will nevertheless result in a much-higher ration of older to younger people.

Thus far, the current debt and entitlement crises, domestic and international, are only a few consequences of increasing life spans. Without a major rethinking of society's core spending programs, the dynamic that created our already unsustainable debt loads is going to worsen as life spans head up the hockey stick.

To be clear, there is nothing about longer lives that is inherently adverse. Personally, I'm completely in favor of much longer health spans. Rather, the problem has been the failure to recognize and adjust to accelerating increases in life expectancies. This failure has led to ballooning expenditures and unsustainable debt. I should clarify and restate this thesis: Obsolete actuarial tables and expectations about the length and cost of retirement, especially on the medical cost front, are the proximate causes of the international fiscal meltdown.

Though many people portray the crisis as ideological, especially if their proposed solution is raising taxes, it's actually about math. And it's pretty simple math at that. The working young, who have always paid a disproportionate portion of the retirement and medical costs of the older and generally wealthier population, cannot bear that load in a demographically transforming world. Three basic solutions have been proposed.

Recently, in fact, the IMF published research that validates my position — that governments have utterly failed to adjust to accelerating increases in life spans. You can access the most-relevant data here, but the first few paragraphs should be required reading for anyone with pretensions of making good public policy.

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Keep in mind that this study completely fails to recognize the accelerating aspect of increases in life spans. While it does point out, indirectly, that we are headed for a demographically driven financial catastrophe, it addresses only the current gap between actual needs and plans to meet those needs. In reality, new biotechnologies are going to catapult life spans so far beyond their current state; it is impossible to deal with the added costs of the aged without radical restructuring of expectations and institutions. A lot of the old assumptions and practices are going to perish. They have to, in fact, to allow society to adjust to very different conditions.

I've often pointed to the Great Depression as the era, historically, of the greatest innovation and investor opportunity. We are now in a period of far greater innovation and far greater investor opportunity. Yes, there's smoke in the air and fires in the distance, but the flames are clearing the fields for new growth.